Inflation as a risk factor; it may be time to buy soon

This topic has 200 replies, 22 voices, and was last updated 17 years, 9 months ago by JWM in SD.

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April 27, 2008 at 9:46 PM #12582

stockstradr
Participant

Here’s a theory I’ve been thinking over now for about three months.

Hyperinflation is coming within a few years. The forces bringing this on are multiple and force our government to conspire to inflate its way out of national debt. Also, the Fed has been forced to ease credit dramatically and pumping hundreds of billions into our financial markets to stabilize and to fight the recession. Additionally, we have rising consumer demand in 3rd and 2nd world nations driving up commodity prices. We also have six trillion dollars of USA debt held in foreign reserves which are getting VERY uneasy about the dollar. The dollar has already fallen I believe about 15% in the last year compared to a trade-weighted basked of currencies.

So all those inflationary forces will soon produce dramatic inflation which will drive mortgage rates up, eventually to double digit interest rates.

A buy point for housing will come soon where the risk of ever-increasing mortgage interest rates will overshadow the downside risk associated with continued falling housing prices.

The smart move will then be to buy property before mortgage rates soar, and finance with FIXED rate loans. Yes, your home value WILL continue to decline for several years but you’ll win as rising inflation means your fixed mortgage payments are worth less and less each year in real dollars. That’s how to screw the mortgage holders. Ride along on the conspiracy which our government is hatching to inflate its way out of debt. If you don’t know what shadow stats are you should educate yourself.
http://www.shadowstats.com/

You think the CPI is 4%? Really? Get a clue.

It is all about timing. Mortgage rates are up 20 basis points already in the last…60 days I believe.

The trick is to buy at the optimal point just before mortgage rates start to dramatically move higher.

For those diehard housing market pessimists, be aware of the possibility of housing prices starting to RISE in nominal prices, if the inflation rate exceeds that typical housing price deflation.

My instinct is that the end of low mortgage rates is VERY near, and the optimal buy point for cities like San Diego and Bay Area may be within the next 6-9 months.

April 27, 2008 at 11:15 PM #195461

jonnycsd
Participant

I agree in principle but do not think it will reach hyper-inflation levels. That said, 5% to 6% per year inflation compounded for 5 years would take a huge chunk out of the mortgage!!

Also, the strategy only holds if you want to buy and hold for ten years or more. The high rates we both expect will depress valuations in the intermediate term.

April 27, 2008 at 11:15 PM #195492

jonnycsd
Participant

I agree in principle but do not think it will reach hyper-inflation levels. That said, 5% to 6% per year inflation compounded for 5 years would take a huge chunk out of the mortgage!!

Also, the strategy only holds if you want to buy and hold for ten years or more. The high rates we both expect will depress valuations in the intermediate term.

April 27, 2008 at 11:15 PM #195517

jonnycsd
Participant

I agree in principle but do not think it will reach hyper-inflation levels. That said, 5% to 6% per year inflation compounded for 5 years would take a huge chunk out of the mortgage!!

Also, the strategy only holds if you want to buy and hold for ten years or more. The high rates we both expect will depress valuations in the intermediate term.

April 27, 2008 at 11:15 PM #195539

jonnycsd
Participant

I agree in principle but do not think it will reach hyper-inflation levels. That said, 5% to 6% per year inflation compounded for 5 years would take a huge chunk out of the mortgage!!

Also, the strategy only holds if you want to buy and hold for ten years or more. The high rates we both expect will depress valuations in the intermediate term.

April 27, 2008 at 11:15 PM #195579

jonnycsd
Participant

I agree in principle but do not think it will reach hyper-inflation levels. That said, 5% to 6% per year inflation compounded for 5 years would take a huge chunk out of the mortgage!!

Also, the strategy only holds if you want to buy and hold for ten years or more. The high rates we both expect will depress valuations in the intermediate term.

April 27, 2008 at 11:24 PM #195481

stockstradr
Participant

Yes, and also my theory has an implied assumption that may not hold up: wages will keep pace with inflation.

I’m not sure that future typical raises will keep pace with inflation

April 27, 2008 at 11:24 PM #195513

stockstradr
Participant

Yes, and also my theory has an implied assumption that may not hold up: wages will keep pace with inflation.

I’m not sure that future typical raises will keep pace with inflation

April 27, 2008 at 11:24 PM #195537

stockstradr
Participant

Yes, and also my theory has an implied assumption that may not hold up: wages will keep pace with inflation.

I’m not sure that future typical raises will keep pace with inflation

April 27, 2008 at 11:24 PM #195559

stockstradr
Participant

Yes, and also my theory has an implied assumption that may not hold up: wages will keep pace with inflation.

I’m not sure that future typical raises will keep pace with inflation

April 27, 2008 at 11:24 PM #195599

stockstradr
Participant

Yes, and also my theory has an implied assumption that may not hold up: wages will keep pace with inflation.

I’m not sure that future typical raises will keep pace with inflation

April 27, 2008 at 11:38 PM #195501

an
Participant

I think salary inflation will be the only thing that can cause price to turn around, not commodity inflation. If we don’t have salary inflation, house price might drop even further in monthly payment term if rates sky rocket, because, at today’s payment, it still does not make sense when compare to rent. Rent won’t sky rocket if salary does not. If salary does not drastically inflate but everything else does, then we might see people having much less $ for houses, which might cause price to compensate.

April 27, 2008 at 11:38 PM #195533

an
Participant

I think salary inflation will be the only thing that can cause price to turn around, not commodity inflation. If we don’t have salary inflation, house price might drop even further in monthly payment term if rates sky rocket, because, at today’s payment, it still does not make sense when compare to rent. Rent won’t sky rocket if salary does not. If salary does not drastically inflate but everything else does, then we might see people having much less $ for houses, which might cause price to compensate.

April 27, 2008 at 11:38 PM #195558

an
Participant

I think salary inflation will be the only thing that can cause price to turn around, not commodity inflation. If we don’t have salary inflation, house price might drop even further in monthly payment term if rates sky rocket, because, at today’s payment, it still does not make sense when compare to rent. Rent won’t sky rocket if salary does not. If salary does not drastically inflate but everything else does, then we might see people having much less $ for houses, which might cause price to compensate.

April 27, 2008 at 11:38 PM #195580

an
Participant

I think salary inflation will be the only thing that can cause price to turn around, not commodity inflation. If we don’t have salary inflation, house price might drop even further in monthly payment term if rates sky rocket, because, at today’s payment, it still does not make sense when compare to rent. Rent won’t sky rocket if salary does not. If salary does not drastically inflate but everything else does, then we might see people having much less $ for houses, which might cause price to compensate.
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